Japan

 

The Great American Heresy

More than a hundred years ago, the brilliant philosopher and father of modern psychology, William James, warned his American compatriots against “scientism”. James saw an increasing tendency to extend the then budding scientific method of controlled experiments in the physical sciences into intractable social and political problems. He warned it would not work, perhaps as much based on his psychological understanding as his philosophical logic, that is, as the old saying goes, people will be people.

Not too many listened to James then — or since. The old logical fault has taken on new vast proportions since the invention of the computer and the incredible ability to accumulate virtually limitless numbers as well as “soft” information. Now the digital revolution has given us the capacity for virtually unlimited mathematical calculations. Listen to that fountain of politically correct wisdom, National People’s Radio, almost any morning or afternoon, and you will hear another long dissertation on some social or political issue, usually foisted on us by the tenuratti, backed up by voluminous, if often irrelevant, statistics.

Nowhere has the disease taken root more than in the business schools, pickled there by management experts, often practitioners of what has been termed “the dismal science” but more accurately, the pseudoscience. A few years ago, I was flattered to be asked to “lecture” a class at the prestigious University of Virginia business school. A professor had somehow learned I had written a popular [not so popular as I would have wished] biography of Soichiro Honda, the Japanese investor and industrialist.

I sat in on the tailend of the professor’s presentation of Honda as “a case study”. I was worried the gentleman might fall off the edge of his lecture platform when, spelling out Honda’s success, writing an algebraic [?] formula across the blackboard, he began to run out of space. Luckily, he left the room after introducing me. I picked up the monologue, telling my young audience I would possibly be going off on a different tangent since I had written an anecdotal book. There were, I must say, a few knowing smirks, indicating I had underestimated the students if not the professors, in their search for networks of future acquaintanceship in these courses rather than “learning” in the classical sense.

I had had considerable exposure to the company and, luckily, despite corporate antagonism toward my project, through a shinseki [a “relative”, the nakahodo, the “in- between-person” who had arranged the marriage of Honda’s eldest son], direct exchanges with Honda, himself. I found Honda a mechanical genius, but no businessman. The evidence was how repeatedly the company had almost bankrupted when he went chasing sometimes valuable, sometimes moonbeam, inventions. [Honda, for example, was virtually the only automobile company to attempt its own automatic gear transmission, later to be abandoned.]

At a certain point in time, as the lawyers say, MITI [Ministry of International Trade and Industry], the all powerful Japanese bureaucracy then overseeing Japan, Inc., intervened. It anointed a production line genius from the wartime Hayakawa aircraft to take over Honda’s “business side”. The rest, as they say, is history. The gentleman in question was an eccentric; e.g., a devoted Wagner fan he annually took a troop of young men to the Bayreuth Festival. But sitting through several drunken evenings in his little gazebo in a palatial house garden hidden away in Tokyo’s Akasakimits’kei neighborhood, I learned many Honda “proprietary” secrets. [I have been amused to see him quoted extensively in more recent books on Honda; he died shortly after our meetings. But then Ouija boards are a common utility in the book writing profession.]

All this was recalled when The Financial Times recently warned of new problems despite all the huffing and puffing over Dodd-Frank , the latest attempted reform of Wall Street by two legislators too associated with political corruption. The FT said “xxx the vast $6,000 billion over-the-counter derivatives market risks being undermined by potential ‘data caps’. xxx”  Hmmm. A good, old and close friend, despite being an economics professor but luckily not in a business school, tells me: “”xxx These models tend to ‘work’ until there is some kind of structural shift. xxx” English? These models tend to work until they don’t work.” Hmmm.

Dr. James, here we go: 2007-08 here we come [again]!

sws-08-26-11

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A new turn in the U.S.-Japan alliance?

Obscured by the earthquake-tsunami-nuclear-threat tragedy, and Mideast crises, there have been subtle Western Pacific geopolitical shifts.

With little publicity in U.S. [or for that matter, the left-leaning Japanese mainstream] media, American military forces played a magnificent role in rescue and early clean-up of the Japanese tsunami.

Grotesquely incompetent Japanese politicians – at any moment there may be another revolting door prime minister – have obscured this along with their studied refusal to honor their own high-performing Self Defense Forces. This is the ruling Democratic Party of Japan [DPJ] core recruited from a 60s generation vociferously opposed to the American alliance and reconstitution of a civilian led Japanese military. It’s taken three years of provocation by Beijing – now seemingly at least temporarily abated – to force full recognition of the growing threat posed by a rapidly arming China, and its obstreperous North Korea ally.

In sharp contrast was the public’s stoic response to 30,000 lives lost with destruction of whole towns and villages. But a 15.3% factory output drop has imperiled Japan’s “just on time” internationally linked export assemblies. Already a ¥4 trillion [$50 billion] extra budget has been voted. Japan’s central bank has doubled its asset-purchases, injected record amounts into money markets and unveiled a one-year lending program.

It’s early to know whether the tragedy will reawaken “yamato damashii!” – that remarkable ethos to overcome adversity characterizing Japan since its rapid emergence as a world power beginning only 150 years ago. But recuperating the $300 billion loss might reinvigorate the world’s third largest economy suffering two decades of deflation. Prejudicing this hope, of course, is the rating agencies’ downgrading of the huge and growing government debt [if held almost exclusively in yen at low rates], the most rapidly aging and declining population in the industrialized world, and lack of dynamic leadership.

Much depends on whether growing internal strife within the DPJ will produce a long hoped for political realignment introducing younger blood and new ideas. Luckily, the DPJ’s campaign against Japan’s powerful bureaucracy has been mostly talk. In fact the legendary bureaucrats performed well in this unprecedented emergency – certainly compared with corrupt utilities management in bed with the politicians.

Backed by public appreciation of American efforts and repeated Chinese provocations – the latest an attempt to corner the rare earths markets on which Japan’s movement toward advanced technology so heavily depends – muffled calls have arisen for strengthening the U.S. alliance. Tokyo’s concern is enhanced by Taiwan’s new formal economic integration with Mainland China and the possibility political domination could follow despite Pres. Ma Ying Jeou’s protestations to the contrary. [Ironically, Taiwan, whose native islanders have fond memories of the relatively benign Japanese 50-year occupation, 1895-45, made the largest contributions after the U.S. to disaster aid.] Tokyo has always seen Taiwan as critically strategic to its defense. And the Obama Administration’s continued foot-dragging on weapons for Taipei has certainly been noted even as they constitute a major issue between Washington and Beijing.

Any expansion of Japanese-U.S. military collaboration will come up against both countries’ budgetary constraints. Rapid American technological progress – with Japan as a junior partner especially in anti-missile defense — could compensate partially for more cutbacks likely in military spending by U.S. Secretary of Defense-designate Leon Panetta, noted for his dovish views.

But this confluence of events has led to whispered speculation the expensive – and strategically dubious — U.S. Marine move from Japan’s southern island of Okinawa to Guam might be shelved. That Marine “fire brigades” could arrive within two hours off the quake area operating from the aircraft carrier USS Ronald Reagan was demonstration of why the Ryukyus chain historically has played such an important role.

This year’s just approved military construction contains another $246 million, added to a $1.2 billion down payment already appropriated, on an estimated $4 billion for transferring 8,600 U.S. Marines from Okinawa. The Japanese government has pledged another $6 billion.

To halt the plan, Tokyo would have to confront local opposition to Okinawa facilities expansion, difficult for the DPJ with its leftwing constituencies. But even if a U.S. diplomat was fired recently for saying so publicly, the Okinawans’ half century blackmail of both Tokyo and Washington is wearing thin. A stronger Tokyo team might just call their bluff, cancel the Guam transfer, and put those yen into reconstruction, producing welcome savings for Japanese — and American — taxpayers. Only a hint of a rainbow on the horizon but…

sws-04-29-11

Obscured by the earthquake-tsunami-nuclear-threat tragedy, and Mideast crises, there have been subtle Western Pacific geopolitical shifts.

With little publicity in U.S. [or for that matter, the left-leaning Japanese mainstream] media, American military forces played a magnificent role in rescue and early clean-up of the Japanese tsunami.

Grotesquely incompetent Japanese politicians – at any moment there may be another revolting door prime minister – have obscured this along with their studied refusal to honor their own high-performing Self Defense Forces. This is the ruling Democratic Party of Japan [DPJ] core recruited from a 60s generation vociferously opposed to the American alliance and reconstitution of a civilian led Japanese military. It’s taken three years of provocation by Beijing – now seemingly at least temporarily abated – to force full recognition of the growing threat posed by a rapidly arming China, and its obstreperous North Korea ally.

In sharp contrast was the public’s stoic response to 30,000 lives lost with destruction of whole towns and villages. But a 15.3% factory output drop has imperiled Japan’s “just on time” internationally linked export assemblies. Already a ¥4 trillion [$50 billion] extra budget has been voted. Japan’s central bank has doubled its asset-purchases, injected record amounts into money markets and unveiled a one-year lending program.

It’s early to know whether the tragedy will reawaken “yamato damashii!” – that remarkable ethos to overcome adversity characterizing Japan since its rapid emergence as a world power beginning only 150 years ago. But recuperating the $300 billion loss might reinvigorate the world’s third largest economy suffering two decades of deflation. Prejudicing this hope, of course, is the rating agencies’ downgrading of the huge and growing government debt [if held almost exclusively in yen at low rates], the most rapidly ageing and declining population in the industrialized world, and lack of dynamic leadership.

Much depends on whether growing internal strife within the JDP will produce a long hoped for political realignment introducing younger blood and new ideas. Luckily, the DPJ’s campaign against Japan’s powerful bureaucracy has been mostly talk. In fact the legendary bureaucrats performed well in this unprecedented emergency – certainly compared with corrupt utilities management in bed with the politicians.

Backed by public appreciation of American efforts and repeated Chinese provocations – the latest an attempt to corner the rare earths markets on which Japan’s movement toward advanced technology so heavily depends – muffled calls have arisen for strengthening the U.S. alliance. Tokyo’s concern is enhanced by Taiwan’s new formal economic integration with Mainland China and the possibility political domination could follow despite Pres. Ma Ying Jeou’s protestations to the contrary. [Ironically, Taiwan, whose native islanders have fond memories of the relatively benign Japanese 50-year occupation, 1995-45, made the largest contributions after the U.S. to disaster aid.] Tokyo has always seen Taiwan as critically strategic to its defense. And the Obama Administration’s continued foot-dragging on weapons for Taipei has certainly been noted even as they constitute a major issue between Washington and Beijing.

Any expansion of Japanese-U.S. military collaboration will come up against both countries’ budgetary constraints. Rapid American technological progress – with Japan as a junior partner especially in anti-missile defense — could compensate partially for more cutbacks likely in military spending by U.S. Secretary of Defense-designate Leon Panetta, noted for his dovish views.

But this confluence of events has led to whispered speculation the expensive – and strategically dubious — U.S. Marine move from Japan’s southern island of Okinawa to Guam might be shelved. That Marine “fire brigades” could arrive within two hours off the quake area operating from the aircraft carrier USS Ronald Reagan was demonstration of why the Ryukyus chain historically has played such an important role.

This year’s just approved military construction contains another $246 million, added to a $1.2 billion down payment already appropriated, on an estimated $4 billion for transferring 8,600 U.S. Marines from Okinawa. The Japanese government has pledged another $6 billion.

To halt the plan, Tokyo would have to confront local opposition to Okinawa facilities expansion, difficult for the DPJ with its leftwing constituencies. But even if a U.S. diplomat was fired recently for saying so publicly, the Okinawans’ half century blackmail of both Tokyo and Washington is wearing thin. A stronger Tokyo team might just call their bluff, cancel the Guam transfer, and put those yen into reconstruction, producing welcome savings for Japanese — and American — taxpayers. Only a hint of a rainbow on the horizon but…

sws-04-29-11

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The Nippon Maru Adrift

The Japanese ship of state has sailed into the perfect storm.

The ruling Democratic Party of Japan leadership battle Sept. 15 will only contribute to the miasma. Whether Prime Minister Naoto Kan hangs on or challenger Mr. Ichiro Ozawa ousts him, neither has demonstrated abilities for attacking deep, abiding issues. In fact, they epitomize leadership failure — five prime ministers in four years! Neither radiates the charisma of predecessor Mr. Junichiro Koizumi [2001-2006]. Maverick to the end, Mr. Koizumi waltzed off stage only just before his liberalization program to finally synchronize Japan with the other competitive economies collided with the worst world business cycle in 80 years.

Japan’s long-term problems are not unlike those of other major democracies. But their intensity – for example, the fastest ageing population – and an uncanny ability to muddle through are peculiarly Japanese. As I quipped to an old friend on my last visit, Japan is a country where all the small things get done – and done expertly – but… Unanswered is whether traditional culture – discipline, persistence, team effort — have eroded so far that they cannot see the society through revolutionary changes, as took place repeatedly over the last 150 years.

Indeed, post-World War II Japan invented the template for booming export-led economies. And when menaced by “voluntary” U.S. quotas, businessmen shifted into quality control [borrowed from American concepts] and upscale manufactures — “outsourcing” to the rest of Asia. But competition intensified excruciatingly when Japan’s “students” – Taiwan and South Korea, and ultimately Communist China – got into the act. The always frugal Japanese could/would not maximize domestic consumer consumption although living standards improved beyond the wildest dreams of an older impoverished generation. Instead, the government resorted to internal borrowing for vast infrastructure and skyrocketing social welfare. That, combined with hubris [splurging on purchases like Rockefeller Center or Pebble Beach Golf Course], brought bubble-bust and stagnation. Meanwhile, the internal debt mushroomed to more than twice the gross national product. Luckily it’s owed Japanese or we would have a Greece with chopsticks.

It’s symptomatic that both Kan and Ozawa have reversed themselves on major issues. Kan, once a firebrand populist, now espouses fiscal discipline. Ozawa, never one to flirt long with substantive issues, preaches “stimulus”, faulting Kan for an upper house July election loss by advocating higher consumption taxes. Ozawa, too, has threats of prosecution for corruption hanging over him.

While the U.S. does not have a dog in this fight, long-term American East Asian strategy is at issue. Ultimately, Washington’s aspirations for East Asian peace and stability now as during 60 years since the Korean War exploded make Japan the indispensable fulcrum for projecting American power. Worries about Beijing’s currency manipulation and export subsidies and the resultant mortgage on the dollar has long since replaced Japan’s trade surpluses and growing currency reserves [half China’s $2.3 trillion]. The Obama Administration exhibits, reluctantly, growing concern about rapidly expanding Chinese military and “soft power”. That explains Sec. of State Hillary Clinton surprising Asians recently by suddenly confronting Beijing on its extravagant claims against the South China Sea littoral powers.

But for the first time since leftwing agitation threatened the alliance in the late-50s, new ambivalences have crept in, for Washington as well as the Japanese. For example, Washington recently quietly dropped the U.S.- Japan Mutual Defense umbrella for disputed islets between Japan and the Mainland.

For Tokyo, China is now Japan’s number one trading partner, replacing the longstanding U.S. Unable to climb off the export-led train, Japanese companies use China as a trampoline to U.S., EU and other markets – selling high end components for reexported assemblies while dreaming of limitless China domestic markets. Although Ozawa recently has courted Chinese business, both candidates profess loyalty to the alliance and realignment of U.S. East Asian bases involving Okinawa. And Tokyo has just acceded to Washington’s entreaties for painful sanctions on Iran, a major oil supplier.

But other issues are more nuanced. Although Tokyo has played along, there has been great concern about Washington’s North Korea tactics. Pyongyang’s refusal to come clean on its bizarre, decades-long kidnappings of Japanese in Japan is a burning issue. Despite Washington’s professions of support, Tokyo felt it has not been given sufficient weight. Now Tokyo has adopted a harder line toward the interminable Six Power Talks aimed at disarming Pyongyang’s nukes, making common cause with South Korea’s hard-line Pres. Lee Myung-bak who wants redress for the sinking of his warship by the North Koreans.

The narrowly contested Party squabble will likely play inconclusively into all these issues. Neither victory for the wily Ozawa nor a narrow win for incumbent Kan would bring political stability. An Ozawa defeat could lead to his bolting for a new political alignment – something he has done several times. It probably would not be the neat two-party, ideological division many foreigners crave but the Japanese don’t seem to cotton to. Furthermore, the Okinawa base squabble is a hairshirt for both capitals that needs immediate redress before local November elections there further inflame the issue. That, too, may not happen in this environment.
sws-09-02-10

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Worrying: a Japanese-Chinese dust-up
Nothing should make the world so nervous as conflict between the two East Asian behemoths, China and Japan. Their long history of curiously incestuous but bitterly conflicted relations dominates history in their part of the world.
That is why even a minor clash between a Chinese fishing boat and small Japanese coastal security craft has turned into a major flashpoint, exciting not only their two capitals but Washington as well.
We may never know the exact details of the episode. But in early September a Chinese fishing craft [and there are fishing boats and fishing boats] bumped two Japanese Coast Guard speedboats. The episode took place in rich tuna grounds among rocky uninhabited islands which stretch southward in the East China Sea from the Japanese main home islands and the Ryuku chain [including Okinawa heavily loaded with U.S. bases] and to Taiwan.
These islands, called the Senkakus by the Japanese, Diaoyu by the Chinese, are claimed by both. They have taken on new importance because of speculation there may be oil and gas deposits beneath them. The argument over their sovereignty and control is an expression of China’s growing economic and military power which recently has seen estimates of the Chinese gross national product surpass Japan as the world’s No. 2 economy.
The “normal” routine in such encounters is that the Japanese take the fishing boats into custody, eventually return them to either their Mainland or, often, Taiwanese homeports. But this time, apparently, the fishing boat captain attempted to make a run for it, but was captured. Tokyo almost immediately released the crew and the ship but held on to the commander to be tried locally under Japanese law.
Beijing howled. Its government media repeated highly chauvinistic claims as it has recently done for other contested [with Southeast Asian nations] islets in the South China Sea. Stock Chinese Communist phrases placed them on a par with Beijing’s sovereignty over troubled Tibet and Singkiang.
An hours-old new Tokyo cabinet first stood its ground. Then, it caved. A local magistrate released the ship’s captain rationalizing the collisions were “deliberate, but not pre-meditated.” Earlier Tokyo versions had the two “bumps” occurring at different intervals, indicating the unlikelihood that they were accidental. And the question hanging in the air was whether the ship’s captain was acting on instructions or a rogue mariner who had taken it on himself to try to intimidate the smaller Japanese craft.
Whatever, behind the scenes, a complex political and diplomatic scramble was going forward. Washington, which in some Japanese circles had been seen as less than responsive in recent international issues to Tokyo’s concerns, especially on the North Korean threat, seemed to shift its position. Only weeks earlier Washington had made a point of removing these disputed islands from the umbrella of the U.S.-Japan Mutual Defense Treaty. But Vice Pres. Joseph Biden in a public address placed U.S.-China relations as subsidiary to concerns of the Japanese alliance.
A State Dept. spokesman used diplomatese to explain that Washington made a distinction between areas under Japanese control and sovereignty – but did reaffirm the application of the Treaty in any defense of Japanese territory against aggression [presumably including China]. [A few weeks earlier, suddenly, Sec. of State Hillary Clinton had forthrightly denounced similar China’s South China Sea claims, backing the Southeast Asians in seeking negotiations with Beijing.]
All that bucked up the Japanese, not the least the new Japanese foreign minister, Seiji Maehara, a power in the heterogeneous ruling Democratic Party of Japan [DPJ]. Maehara, who just arrived at the post largely because of internal politics of the DPJ, unlike many of his former socialist and pacifist Party colleagues, is seen as a hawk on China and one of the most stalwart supporters of the American alliance. But some Japanese explained the capitulation as “advised” by Washington.

Meanwhile, Beijing had added important pressures to its propaganda. China is now Japan’s number one trading partner and an important export and reexport market market at a time of downturn in the Japanese economy. Although denied later, the Chinese reportedly halted shipments of “rare earths” – on which China temporarily has a world monopoly. These minerals are critical to many electronic products, the heart of Japanese high tech exports. [Beijing later denied any such ban – perhaps with recognition that a Colorado company as well as others are beginning to stir to break Beijing’s temporary monopoly with North American and perhaps African production.]
Four Japanese working for a company which has been engaged in a long-term project to “demobilized” chemical warfare sites in China built by the Japanese during World War II were arrested, ostensibly for espionage. [The Japanese company specializes, among other things, in “unmanned construction” projects which permit operations in dangerous areas by remote control.] Beijing canceled bilateral meetings which characterize Japanese-Chinese relations in an effort to keep a complex and convoluted economic, political and cultural relationship on an even keel.
As this is written, the saga continues. Beijing is demanding an “apology” – an issue that takes much more precedence in East Asian cultures than perhaps in the West where “face” is critical – and compensation.
Sws-09-25-10

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